Year-end view | Industry

Volatile stock markets impact fund-raising by companies


Initial public offers show a drop of 54%

Fund raising took a beating in 2018 with companies raising a cumulative amount of ₹63,744 crore – a 60% drop compared with previous year’s record ₹1.60 lakh crore.

Further, initial public offers (IPOs) also registered a drop of 54% in 2018 amidst volatile secondary markets.

According to Prime Database, a total of 24 companies launched their IPOs in 2018, raising a total of ₹30,959 crore, much lower than ₹67,147 crore raised through 36 IPOs in 2017.

Largest IPO

The largest IPO in 2018 was from Bandhan Bank at ₹4,473 crore.

Incidentally, only six of the 24 companies that launched their IPOs in 2018 had a prior investment from private equity or venture capital funds. In terms of investor response, six IPOs were subscribed more than 10 times, while seven issues received subscription of between three and 10 times.

Some of the issues that got subscribed over 10 times were HDFC Asset Management, RITES, Bandhan Bank and Galaxy Surfactants.

Volatile stock markets impact fund-raising by companies

In terms of listing day gains, seven new listings gave returns in excess of 10% on the day of their debut though the ongoing volatility and correction had seen 15 of the 24 issues currently trading below their respective issue prices.

Meanwhile, IPOs by small and medium enterprises (SMEs) hit a new high in 2018 with 141 companies raising a record ₹2,285 crore. In 2017, as many as 133 SMEs raised a total of ₹1,679 crore.

The largest SME IPO of the year was from East India Securities at ₹88 crore.

Interestingly, 2018 turned to be the best year for the government as ₹78,143 crore was raised by way of divestment. Government-owned companies like Bharat Dynamics, Hindustan Aeronautics (HAL), Mishra Dhatu Nigam, RITES, IRCON and Garden Reach launched their IPOs in 2018, which also saw an offer for sale (OFS) by NMDC and Coal India.

Pranav Haldea, managing director, Prime Database, is of the view that going ahead not much action is likely to be seen at least in the first half of 2019 till the conclusion of the national general elections.

This is despite the fact that the IPO pipeline is huge with 59 companies holding regulatory approval wanting to raise almost ₹63,170 crore and another 19 companies wanting to raise almost ₹18,067 crore awaiting the approval of the Securities and Exchange Board of India (SEBI).

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Printable version | Jan 28, 2020 7:34:08 PM |

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